GROUP RESULTS FY17 RESULTS

Transcription

1 CLICK FY 2017 TO EDIT RESULTS MASTER TITLE YEAR ENDED 30 JUNE STYLE 2017

2 GROUP RESULTS 2

3 FINANCIAL HIGHLIGHTS Group Underlying 1 Reported FY 2017 FY 2016 FY 2017 FY 2016 Revenue 1, , , ,641.9 EBIT (469.7) NPAT (continuing operations) (516.9) 38.2 NPAT (including MedicalDirector) (516.9) 74.7 NPAT BaU As at 30 June June 2016 Free cash flow Dividend cps 100% franked (60% UNPAT) » Decline in UNPAT driven by the repositioning in Medical Centres - Bulk Billing and partially offset by strong Imaging and solid Pathology performance» Free cash flow > 2½x FY 2016 driven by lower HCP spend and capital discipline. Self-funded capex, dividend and reduced net debt.» BaU broadly in-line with FY 2016 as Primary invests for future growth» Reported results not comparable with FY 2017 including $587m non-cash impairment charge» More positive regulatory environment in the near-term 3 1 Underlying performance reflects Primary s core trading performance. In FY 2017 it excludes the impact of impairments, costs associated with business restructuring and transformation, and non-recurring items 2 NPAT (continuing operations) excludes MedicalDirector s result in FY 2016 which is separately disclosed as profit from discontinued operations. 3 BaU before ramp-up of new centres and Health & Co initiative-see slide 6 4 FCF before capital recycling. FY 2016 also before ATO refund and MedicalDirector cash flow (refer slide 28)

4 4 SELF-FUNDED GROWTH AND DIVIDEND $129m capex split 55:45 maintenance : growth (75) (44) Opening cash OCF PPE Net HCP acquisitions» Capex of $129m down $64m or 33% 1 of which HCP capex down $41m PP&E capex down $20m» Split 55:45 between maintenance and growth» Delivered $84m free cash flow >2½x FY (11) Other intangibles» Self-funded $58m dividend and reduced net debt $36m (58) (23) Net cash after FCF $84m FCF funded dividend and net debt reduction 92 Capital recycling Dividends 36 Net cash after dividends 1 Capex is before capital recycling initiatives. FY 2016 also before MedicalDirector (refer slide 28) 2 FCF before capital recycling initiatives. FY 2016 also before ATO refund and MedicalDirector cash flow (refer slide 28) Reduction in borrowings/ finance costs 2½ x 33 FY16 FCF Closing cash FY17 84

5 IMPROVED NET DEBT POSITION Reported 30 June June June 2015 Total debt ,205.5 As at Cash (95.5) (82.3) (50.0) Net debt ,155.5 Bank gearing ratio (covenant <3.5x) 2.5x 2.4x 3.0x Bank interest ratio (covenant >3.0x) 7.9x 6.6x 5.9x Gearing (net debt: net debt + equity) 29.5% 25.2% 32.4% 5» Significant improvement in leverage in FY 2016 from $327m capital recycling program» Further improved in FY 2017 from free cash flow» Syndicated bank facility has gearing and interest ratios covenant. We have significant cover on the limits» Substantial liquidity available - $365m headroom on financings» Gearing impacted by $587m non-cash impairment reducing equity Net debt reduction FY15 FY16 FY17

6 IMPACT OF GROWTH INITIATIVES Underlying FY 2017 FY 2016 Better/ (worse) % NPAT (4.9) New centres / Health & Co NPAT BaU (1.0)» Underlying performance, before new centres and Health & Co, broadly in-line with FY 2016 FY 2017 openings: Medical Centres - Corrimal Medical Centre, Brisbane IVF Imaging - River City and Holmesglen Private Hospital FY 2016 openings: Imaging - Varsity Lakes and National Capital Private Hospital» FY 2018 will have margin drag from 4 new Medical Centres, Perth IVF, and Kawana Imaging Centre 6

7 BRIDGE OF REPORTED TO UNDERLYING FY 2017 Reported Impairment Restructuring & strategic initiatives Non-recurring items Underlying EBIT (469.7) Finance costs (43.1) (43.1) PBT (512.8) $644.3m EBIT adjustment Income Tax (4.1) (39.4) NPAT (516.9) 92.1 FY 2016 Reported Balance Sheet Review Restructuring & strategic initiatives Gain on sales / ATO Underlying EBIT (36.9) Finance cost (58.0) (58.0) PBT 56.4 $81.9m EBIT adjustment Income Tax (18.2) (41.5) NPAT » Reported results are not comparable due to the changing nature of business - refer slides for more detailed analysis 7

8 DIVISIONAL RESULTS & STRATEGY 8

9 MCBB: FY 2017 CHANGE IN METRICS Underlying FY 2017 FY Better/ (worse) $ Better/ (worse) % HCP capital expenditure EBITDA less HCP capital expenditure Revenue (10.9) (3.3) EBIT (22.3) (31.0) Under new contracts, we have significantly reduced upfront costs, improved cash flow and widened appeal HCP capex down $30.3m EBITDA-HCP capex up $3.3m To balance the value proposition, HCP revenue share up (see slide 11). Revenue down $(10.9)m Additional investments made to: recruit and support HCPs expand service offerings dental, specialists, occupational health, chronic care Employee engagement Corrimal / Brisbane IVF opened 9 1 FY 2016 restated to ensure the allocation of expenses from corporate is consistent with FY 2017 EBIT down $(22.3)m = Revenue down $(10.9)m D&A savings $4.7m Costs up $(16.1)m

10 MCBB: GP KEY DRIVERS GPs FY 2017 FY 2016 FY 2015 Better/ (worse) % FY16-17 Better/ (worse) % FY15-16 Headcount 1, FTEs Gross billings ($ m) n/m n/m Share of revenue (%) 42.9% 46.0% 47.6% (310) pp (160) pp GP capital expenditure 2 ($ m) EBITDA-HCP capex 3 ($ m) » FTEs more appropriate measure with increasing part-timers/ lower contracted hours» Gross billings broadly stable year-on-year» Primary receiving lower share of billings under new contracts hence greater number of GPs is critical to revenue growth» GP capex reducing significantly year-on-year releasing capital to fund expansion» EBITDA-HCP capex is a better measure as it reflects immediate cash impact of new contracts with accounting performance delayed due to 5 year amortisation EBITDA -HCP capex FTEs based on 40-hour week 2 Gross GP capex. Gross HCP capex FY 17 $30.3m, FY 16 $60.6m, FY 15 $79.9m 3 Prior years restated to ensure the allocation of expenses from corporate is consistent with FY 2017 FY15 FY16 FY17

11 MCBB: GP RECRUITMENT» Recruitment and retention are critical success factors» Record 153 GPs recruited, with momentum increasing» Retention improved to 92% across cohort with 1/3 of leavers contracts not renewed» Strong pipeline of GPs. Plus record 92 registrars over 12-month training cycle» $19m after-tax GP capex, 73% of new GPs electing for no-upfront contracts Quarterly GP recruitment # of GPs (25) Record recruitment 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H GP capex () Q1 Q2 Q3 Q (75) Joiners (LHS) Leavers (LHS) After-tax capex (RHS)-1 FY 17 RESULTS Quality reset masks stronger retention levels 5.00

12 MCBB: STRATEGY» HCP and employee engagement Improve offering to HCPs: recruitment packages, increased support services, nurses, relationship team» Staff engagement activities» Diversification of service offerings Dental, specialists, IVF, occupational health, integrated care» Expansion Opening of Corrimal centre and Brisbane IVF Reconfiguration of vacant space Roll out of 4 new medical centres and Perth IVF in FY 2018» Portfolio optimisation Refurbishment of existing sites Closure of underperforming Parramatta centre» Customer experience Improvement in patient experience e.g. improved patient journey, queue management EXPANSION INVESTMENT ENGAGEMENT Recruitment Reconfigurations Corrimal NSW IVF BNE 4 New Centres & IVF Perth -FY18 Helix (Black Swan) Refurbishments Customer Experience BACK TO BASICS HCP Recruitment & Retention Staff Development & Retention Leadership Conference Industry & Government DIVERSIFICATION Dental Specialists IVF Occupational Health Integrated Care 12

13 MCPB: HEALTH & CO Underlying FY 2017 Revenue 1.8 EBITDA (2.3) EBIT (2.3) Capital expenditure 8.4» Launch of brand and partnership with Professor Kerryn Phelps» 5 clinics in Health & Co network to-date» Strong pipeline of interest 13

14 PATHOLOGY: FY 2017 ANALYSIS Underlying FY 2017 FY Better/ (worse) % Revenue 1, EBITDA Depreciation (18.8) (19.1) 1.6 Amortisation (7.7) (7.5) (2.7) EBIT Capital expenditure » Above market revenue growth of $44.0m or 4.4% Increases in both volume and price» EBIT margin compression Property costs with 124 additional Approved Collection Centres and rental rate increases Consumables and cost of new genetic tests» Maintained disciplined approach with capex down 33.6% on pcp 14 1 FY 2016 restated to ensure the allocation of expenses from corporate is consistent with FY 2017

15 PATHOLOGY: STRATEGY» ACC costs Net 124 ACCs in response to Government policy uncertainty Strategy reset with greater policy clarity FY 2018 initiatives to reduce rental cost growth:» Rent negotiation discipline» Portfolio assessment v target margins» Exit or renegotiate underperforming sites» Diversification Niche specialties: Kossard Dermatopatholgy Partnerships with operators aligned to specialties Expansion in private hospitals Medical Centres revenue optimisation eg skin clinics Organic opportunities in Southeast Asia via capital light joint ventures» Driving efficiencies Optimisation of laboratory infrastructure and procurement processes 15

16 16 IMAGING: FY 2017 ANALYSIS Underlying FY 2017 FY Better/ (worse) % Revenue EBITDA (6.6) Depreciation (16.8) (25.6) 34.4 Amortisation (12.0) (13.9) 13.7 EBIT HCP capital expenditure Capital expenditure » Strong EBIT expansion reflecting benefits of business portfolio management Closure of uneconomic community sites Focus on higher margin modalities e.g. MRI and CT Growth from Medical Centres through focus on service offerings (revenue up 8%) Containment of labour growth $12.2m costs in EBITDA from sale and leaseback and property trust. Offset by savings in depreciation and notional interest Saving in amortisation from more radiologists on no-upfront and roll-off of Symbion hospital contract amortisation» Self-funding for 2 nd year. 48.3% reduction in total capex on pcp with HCP capex reducing 58.3% 1 FY 2016 restated to ensure the allocation of expenses from corporate is consistent with FY 2017

17 IMAGING: STRATEGY» HCP contracts Radiologists stable at % starters on no upfront contracts» Portfolio alignment and investing for growth Hospital contracts (Holmesglen) Northern Beaches PPP critical for enhancing reputation in FY18-19 Fit for purpose high-end imaging centres (River City, Kawana) Primary s large-scale medical centres network (Corrimal) Whole of Primary view improving service levels to optimise referrals 17

18 DIGITAL INVESTMENT» Deliver a secure and scalable platform. Investments underway or in planning: 18

19 GOVERNMENT & SUMMARY 19

20 GOVERNMENT POLICY» Federal Budget gave clarity on: Progressive restoration of Medicare indexation for GPs, specialists, some imaging modalities. Delivers ~$3.5m annual revenue growth in FY 2019 Bulk bill incentives to remain in pathology and imaging Rent regulation for pathology ACCs removed from agenda» MBS review continues but limited findings released to-date» Primary likely to participate in 12 Health Care Homes trials» On-going discussion regarding RANZCAR/ADIA 1 potential Quality Framework» More positive short-term policy settings» Irrespective of policy, diversification of revenue: Health & Co, non-mbs GP services and pathology specialities» On-going dialogue to influence future policy debate 20 1 RANZCAR: Royal Australian and New Zealand College of Radiologists. ADIA: Australian Diagnostic Imaging Association

21 WRAP UP» Aims Cement position as leading supporter of quality healthcare services Deliver long-term sustainable growth to shareholders Become preferred place for HCPs to practise, staff to work, and patients to visit Drive patient-centricity throughout Primary modalities with Medical Centres at the centre» Transformation agenda FY 2017 Increasing HCP numbers Diversifying and expanding service offerings Growing the Medical Centres and Imaging footprints Investing in technology and people capabilities Optimising Group synergies and better integration of offerings Improving employee engagement» Expected to deliver the pathway for sustainability and growth» Dr Parmenter commences in September 21

22 APPENDICES A MARKET LEADING NETWORK As at August

23 INDUSTRY TRENDS 5 year growth rate of 3.9% 5 year growth rate of 6.1% 5 year growth rate of 6.0% 5 year growth rate of 5.3% 23

24 UNDERLYING RESULTS BY DIVISION FY 2017 $M Medical Centres BB Health & Co Pathology Imaging Corporate Group Revenue , ,658.6 EBITDA (2.3) (16.1) Depreciation (20.8) (0.0) (18.8) (16.8) (2.8) (59.2) Amortisation (55.4) (0.0) (7.7) (12.0) (2.3) (77.4) EBIT 49.6 (2.3) (21.2) FY $M Medical Centres BB Health & Co Pathology Imaging Corporate Group Revenue ,618.5 EBITDA (10.3) Depreciation (20.0) - (19.1) (25.6) (1.6) (66.3) Amortisation (60.9) - (7.5) (13.9) (4.4) (86.7) EBIT (16.3) $33.0m of inter-company revenue/expenses have been eliminated at the Group level (FY 2016 $33.1m) 2 FY 2016 restated to ensure the allocation of expenses from corporate is consistent with FY 2017

25 RECONCILIATION OF REPORTED TO UNDERLYING FY 2017 FY 2017 $M Reported Impairment Restructuring & strategic initiatives Non-recurring items Underlying Revenue 1, ,658.6 EBITDA (333.1) Depreciation (59.2) (59.2) Amortisation (77.4) (77.4) EBIT (469.7) Finance costs (43.1) (43.1) PBT (512.8) Income Tax (4.1) NPAT (516.9) » Impairment charge: goodwill in Medical Centres ($468.5m) and asset carrying values and associated provisions including ex Symbion sites ($118.5m)» Restructuring and strategic initiatives: transformation costs ($21.9m), redundancies ($11.2m) and set-up of private/mixed billing medical centre vehicles and pathology in SE Asia ($6.1m) 25

26 FY 2016 $M RECONCILIATION OF REPORTED TO UNDERLYING FY 2016» Balance Sheet review including write-offs of property, legacy IT costs and sundry assets» Restructuring and strategic initiatives Reported Balance Sheet Review Restructuring & strategic initiatives» Gains on sales of THI and VEI shareholding, and dissolution of a Joint Venture» Adjustment to the ATO settlement relating to potential HCP tax liabilities Gain on Sale / Dissolution ATO settlement Underlying Revenue 1, (23.4) 0.0 1,618.5 EBITDA (23.4) (13.5) Depreciation (70.1) (66.3) Amortisation (86.6) (0.1) (86.7) EBIT (23.4) (13.5) Finance costs (58.0) (58.0) PBT (23.4) (13.5) Income Tax (18.2) (41.5) NPAT continuing operations

27 MCBB: FY 2017 ANALYSIS Underlying FY 2017 FY Better/ (worse) % Revenue (3.3) EBITDA (17.7) Depreciation (20.8) (20.0) (4.0) Amortisation (55.4) (60.9) 9.0 EBIT (31.0) HCP capital expenditure EBITDA less HCP capital expenditure Total capital expenditure (before capital recycling) FY 2016 restated to ensure the allocation of expenses from corporate is consistent with FY 2017

28 CASH FLOW RECONCILIATION Underlying FY 2017 FY 2016 Movement $ m Operating cash flows (13.6) Payments for PP&E, HCPs, intangibles (128.6) (193.1) 64.5 Free cash flow Capital recycling (316.4) ATO refund MedicalDirector operating cash flow MedicalDirector investing cash flow - (11.8) - Dividends (58.4) (64.4) 6.0 Debt reduction / finance costs (22.8) (310.9) Net increase in cash held (18.9) Opening cash F/X (0.1) 0.1 (0.2) Closing cash

29 TAX IMPLICATIONS OF HCP ACQUISITIONS» Healthcare Practitioners contracted on or after 1 July 2015: Deferred tax liability (DTL) to be recognised at the time of the acquisition of healthcare practices and capitalisation of contractual relationship intangible assets. Equal movement in DTL will ensure an effective tax rate of 30%» Healthcare Practitioners contracted prior to 30 June 2015: No DTL has been recognised regarding the acquisition of healthcare practices and capitalisation of contractual relationship intangible assets to-date Therefore there is a non-deductible (permanent) difference which will increase the notional effective tax rate above 30%. This will progressively decrease as the associated amortisation expense is recognised and runs off. The additional accounting tax expense is as follows: Additional Accounting Tax Expense

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